The Venezuelan Curse (Part 1)

26:24But of course, in the logic of limitless wealth, we can do all of the industry required and all the infrastructure required to create that car. But in order to make sure that people buy it domestically, especially if the competition is Ford, Chrysler, etc., we're going to also have to impose high tariffs on those exports and then basically get people to buy the local car as opposed to the imported car. But people may not want it because its quality is not assured, right? And so the viability and certainly the profitability of that national car is tied to a long-term reality that, as we talked about in a democratic context, is really difficult to see bear out.

27:07And so they tried to start this. First, they tried it through a tractor company. The company was called Fine Attracto. They built the infrastructure. They built the warehouses. They bought the machines. and there wasn't a single tractor that left the production line before the oil money evaporated. And so, you know, again, these are, you can go and see the warehouse and it's, you know, dilapidated. But again, at the time, yes, there were lots of different opportunities and lots of excitement about how to start companies that are not tied to oil, which then creates for Latin America what is a very robust middle class.

27:47This is a middle class who is benefiting from access to cheap dollars, and they use these cheap dollars to travel internationally. This is the period of, as we remember it in Venezuela, which is to say, it's cheap, give me two. And so you hop on a flight to Miami on a Friday and come back on a Sunday night. And people are just like Venezuelans, they're using cheap dollars to just shop internationally. Shop internationally. But of course, that's at the individual level. This is also happening structurally. And this is, you know, I don't know how in the weeds you want to get into the dynamics of petrostate.

28:29Let's go in the weeds into the dynamics of petrostate. Okay, okay. Into the weeds we go. So the major problem of a petrostate is not just dependency on a single resource which is volatile in an international marketplace. The major problem of a petrostate is that it creates perverse incentives. And so when, for instance, you have a period of oil boom, especially as massive as the one induced by the oil crisis of the mid-1970s, and Venezuela was just reaping massive amounts of petrodollars, The incentive to invest those petrodollars in domestic industry in order to induce import substitution industrialization, which is to say to substitute our dependence on imports by industrializing our economy so that we can domestically produce what we would otherwise import.

29:27The mass availability of petrodollars makes it far cheaper and far quicker to just continue importing rather than investing those resources in the domestic economy and therefore create a different industrial apparatus that could generate independence, economic independence, away from imports. And what you're trying to do, you're trying to convince people, while the dollar is very strong, to domestically start to make goods that they can get very, very, very cheaply internationally. And it's just like, it's very hard to do that. It's incredibly hard to do that, right? It's sort of like saying, you know what?

30:09You're sitting on a winning lottery ticket. Don't really spend it. Just save. Yeah. Yeah. I mean, it's in some ways that simple, but the psychology of it is really hard, especially, of course, if you have a country where there's inequality, right? And then the incentive is to spend not on the long-term industrialization that might generate some stability, but rather on the quick import that can satisfy the immediate needs of X person at any given time, right? And that translates from anything to medicine, to basic goods, to luxury items like cars or electrodomestics, etc., etc., right? And so the availability of cheap dollars in an oil economy in the midst of a boom makes the dependency not on oil but on imports all the more pronounced.

31:01And that ultimately is the crisis of a petrostate, that the dependence on oil generates the vast availability of cheap dollars, which then creates an additional dependency on imports, which then when the bust comes, you can no longer buy those imports cheaply and you have nothing domestically to replace it with.

31:39Chapter 4, The Crisis Years of the 80s and 90s. Your family ends up leaving the country. What was your understanding of what was going on? I mean, you were extremely young. What was your family's understanding? So, I left when I was 16. and as I said when we started this will sound very social scientific but of course living it was a different story you can index my youth and adolescence in terms of successive dramatic moments of crisis just give you three examples so the first one was in 1989 in February You were like 11? Yes. And so I was in school. And this was a Monday. My mom had dropped my sister and I off at school.

32:39And suddenly parents started coming to school pulling their kids out. And you could hear it on the loudspeakers. Like, you know, so-and-so, your parent is here. Please report to the office to return home. So-and-so, your parent is here. Please return to the office. So-and-so. And it was like one after the other. I was like, what is going on? And then finally, it was my turn. Like, Alejandro Velasco, your mother is here. Please come to the office to be picked up. And she was in a state of panic. She's like, get in the car now. And like, we'll get in the car. And we sort of rush back home. And what had been happening was a started as a small protest over a hike in public bus fares.

33:27But it was part of this much at the time, I didn't understand it. But part of this much larger structural adjustment package, which had been announced by the recently reelected president who had presided over the oil boom of the 1970s, and who was elected largely on the promise of returning to that period of oil boom. But, of course, with none of the oil boom and with many of the accumulated debts of that earlier period. And so he, even though he had denied it during the campaign trail, pacted with the International Monetary Fund to get an influx of cash for Venezuela, but with extremely severe conditions for how that cash was going to be used.

34:08social services needed to be slashed, public companies needed to be privatized, and subsidies to things like, for instance, public transportation needed to be cut. And that was the first thing that people felt, the Monday that the policies went into effect, the hike in the price of fares, and people started to protest.

34:41And that protest quickly grew massive and uncontrollable.

34:58And then the government first deployed the police, which was very quickly overrun, and then deployed the military. They called the curfew and everybody has to stay home. And again, this is all happening during that Monday. This is February 27th of 1989. And so we get home and we don't leave home for two weeks. And during those two weeks, you're like trying to watch the news, but you're also at the same time hearing gunfire from the military that's trying to quell these protests.

35:40Later on, we discover that what had happened was what the Inter-American Court of Human Rights called a state-sponsored massacre. Hundreds of people died, upwards of perhaps as many as a thousand. You know, mass graves were discovered later. And so this really, you know, as an 11-year-old child, you're like, the primary thing you worry about is like, am I going back to school? Right. But then you realize something seems very different. You know, the kind of the state of anxiety of my parents, of my friends' parents, of the adults in school. It's very different. That sense of, you know, a stable country that had, you know, enjoyed, even if it was under some kind of economic duress during the previous almost 10 years, that seemed no longer tenable.

36:30Example one. Example two. so it was 1992 in February also there's something about February Venezuela history which is kind of curious to think about but again early in the morning before I was going to school but my mother always has a role in this she wakes me up very early and says you got to come and watch what's going on and so we turn on the television set and And what you see on the image on the screen is this grainy, I mean, I know that it seems weirdly cinematic, but that's the way that my mind remembers it. It's a grainy image of a military officer backed by two other ones holding large rifles.

37:18And this guy was reading a statement saying that there's a coup that has taken place. We are seizing control over the state in order to bring about democracy to Venezuela, which has been trampled by the corrupt regimes that have been in power. And that's the first thing. And then you start to hear the fighter jets flying overhead. And then you start to hear, you know, bombs going off. And then you start to see as dawn turns into morning, other images come forward. And, you know, this was a very famous image, but I remember watching it live, which was of this person that at the time none of us knew.

37:59His name turned out to be Lieutenant Colonel Hugo Chavez.

38:08Who had come out after surrendering, after unsuccessfully trying to take over the presidential palace and arrest the president at the time, Carlos Andres Perez. And he was given this period of time to speak to the nation, primarily to tell the troops elsewhere that were loyal to him to lay down their arms. But he used the time that he had to also in a very subtle but extremely effective way talk about two things. First, why they undertook this coup attempt. And also to take responsibility for it. And those two things were astonishing to hear, even for me as a 14-year-old, because no one had taken responsibility for what by that point was very clearly an economic crisis that had come about to Venezuela.

39:04Everyone would blame somebody else. Oh, the IMF or the prior presidents or, you know, this person or that person, etc. Y yo ante el país y ante ustedes asumo la responsabilidad de este movimiento militar bolivariano.

39:42I don't agree with what happened, but the dude's not entirely wrong. It's where you, like, knowing where Chavez's story goes, you describing that moment, it gives me chills. It makes me feel the feeling of, like, I don't know, like adrenaline or something. Imagine living it, right? So, of course, that was dramatic. The third example happens a little bit later in 1992. This will tell you something else about me. So, on November 25th, I believe it was November 25th, Guns N' Roses played in Caracas. Wow.

40:32Were you a big GNR-er? Oh, yeah. I was Appetite for Destruction Day's GNR fan, okay? I'm talking like old school, you know, Roxy live type situation. And so this was the first time that Guns N' Roses had played in Latin America. Oh, wow. And it was at the Use Your Illusion tour. Oh, that's a show. It was a show. And so, of course, you know, I did everything that I could to convince my, you know, my mom and friends. Like, we got to go and got tickets to go. And then, like, we organized this, like, group of us to get to the concert. and, you know, we went and there's all sorts of speculation. Is Axel going to show up?

41:16Is Slash going to play with his back to the audience? How late are they going to be on stage? Like all the things. I'm like just eating it up. The show was amazing. Unbelievable. So fantastic. You know, I still get chills thinking about that. So, you know, we basically kind of sleep through the whole next day. And then the day after that, we wake up to another coup. Pueblo Venezolano, en nombre del Movimiento 5 de Julio, les hago un llamado para que salgan a la calle y terminen de derrumbar este gobierno que solo ha dejado miseria para ustedes. A mis compañeros de arma los invito a que se una en esta lucha para terminar de derrotar el gobierno de Carlos Andrés Pérez.

42:01Repito, al pueblo... There's another coup attempting, and this one was far bloodier, far louder, far scarier, also unsuccessful. But I think for me at that moment, I realized, and I'm sure my parents made the same calculation, which is why even then they started making plans to leave, which we did a couple of years later. This isn't just a flash in the pan. Now we have this thing that happened in 1989, which was eventually known as the Caracasso, which if you think about it in social scientific or historical terms, you can really think that it ruptured the social pact between the government and the population writ large.

42:38And then you have the coup of Chavez in February of 1992, which gives the sense that, okay, the government itself is not stable. Yeah. And then this additional coup, while Chavez is in jail, right? So clearly, it was a sense not only that the government was unstable, but that anything can happen, and who knows what the future brings.

43:08We're going to take a short break. When we return, we arrive at the most formative era in modern Venezuelan history. Hugo Chavez takes over.

43:55Welcome back to the show. We're now in Chapter 5, the origin story of Hugo Chavez. So, Hugo Chavez was born in 1954 in Barinas, in the Plains region of Venezuela. The reason why it's significant is because that's a region known as sort of the heartbeat of the country. It's where most of the folkloric music comes from, some of the folkloric literature comes from. And so it's really kind of a nationalist core of the country. And that deeply informed his sense of self. Some people have said he's hardscrabble, super poor. That's not quite the case. His parents were schoolteachers. He had several siblings, and so it's not like they were doing well, but it's not like they were living in misery, right?

44:44His upbringing in the 1960s was really just, you know, kind of an impoverished but not miserable in that sense sort of life. Part of what's significant about his biography is that much in the way that, and I'm not comparing myself to Chavez, but much in the way that I was sort of narrating, you know, my own upbringing and life history, both in Venezuela and since I arrived in the United States, as one that is indexed by these moments, dramatic moments in Venezuelan history, so too was it for Chavez. He was born in 1954 during that period of dictatorship that I talked about before, the advent of democracy.

45:25But his youth was in the formative period of democracy. When he became an adolescent, he joined the military academy at a moment when the military academy, in the context of democratic stability, had become really professionalized and was seen by many as a pathway towards upward mobility. but also as somebody from the poor sectors popular sectors of venezuela um you know he had interest in the kinds of things that all of us do in venezuela um which is baseball and he was actually a standout baseball player and had dreams of becoming a major league baseball player in the united states and so that's all to say that of course we now remember gochavez as a kind of stridently anti-American figure, that is not the case, right?

46:13There wasn't kind of this, you know, breeding animosity towards the United States. And that's generally true in Venezuela. Venezuelans are not, by and large, an anti-American population, in part because of this long history of relationship with the United States. But he joins the military, and a couple of things happen that are really significant. The first is, as a cadet, he is sent to different countries of Latin America to observe governments and militaries. He goes to Peru, where the military dictator and no relation, Velasco Alvarado, is experimenting with a different approach to military rule than had been the case elsewhere in Latin America, which had been much more tightly wound around elite control of resources and repression.

47:04And more about, well, the institutions of the state are already captured by the elites, and the military is the only one that can project any kind of social benefit. And so this was more of like a socially conscious military dictatorship. Wait, so the idea is that you have like, the haves are the elites, and they're sort of capturing the resources, and the military are going to be a counterweight that stands for the people? Yes, exactly. But then the second thing that happens during that time is that his brother, Adán Chávez's older brother, is a radical Marxist. He's lining up with the guerrillas.

47:44He is very much, you know, in line with the idea that only armed revolution is going to bring us to paradise. And so that's what begins this process for Chavez. And it's in 1982 that he begins this movement called the Movimiento Bolivariano Revolucionario. What does that mean? Revolutionary Bolivarian Movement 200. And the 200-year anniversary of Bolivar. Right. And the idea is that, you know, on his 200th anniversary, the vision that Bolivar had for not just Venezuela but Latin America more broadly will come to fruition. and we will be the people who marshal that into reality. So Chavez persuades his followers, people in the military, to read up on these 200-year-old ideas about revolution and a united Latin America.

48:33And unlike most book clubs, his goes somewhere. It leads to his famous failed coup, the one that ends with him live on national TV telling his followers that he's stopping for now. Chavez leaves prison in 1994. Four years later, he uses his new national profile to run for president. He wins.

48:56Chapter 6. Allo Presidente.

49:17That's what I can say. And now, as the president of Venezuela, I will never change my condition. Soldado de un pueblo. Hombre de un pueblo. Lucharón de un pueblo. Y siempre a todo por un pueblo. Chávez was a gifted communicator, although now we know, not now, we've known for a while, that he also took classes in communications. And that was coupled with, as I mentioned before, this really dramatic moment after his failed coup where he goes on television and delivers this message. And so he knew from an early moment that television specifically was an extremely important communicational vehicle and medium.

50:03And so one thing that he does early in his presidency is he starts this talk show. R.N.B. La Voz de Venezuela presenta

50:21Hello, Presidente. El programa del presidente Hugo Chávez-Frias en vivo. So every Sunday, it's called Hello, Presidente, to reflect that you could just call up the president, like, hello, hello, hello, Presidente, right? And when the phone lines were open? Initially. Wow. Yes. Not later, but initially the phone rings were open. Buenos días, señor presidente. Buenos días, Aidey. Buenos días a tu familia, El Valle. Estoy tan emocionada como el día aquí a Bogotá. Bueno, que Dios te bendiga. Saludos a tu familia. Y vives en El Valle, en qué parte? En San Antonio. En San Antonio. And this is really, really central to understanding or even trying to understand Chávez, Chavismo, where we are right now in Venezuela.

51:05It is not only not accurate, but it is willfully false to suggest that Chavismo was a cohesive political project from the start. The primary hallmark of Chavismo is adaptation over time. And so Chavez, at the moment when he's elected, has a particular project in mind, but it is neither socialist nor anti-American. Quite the opposite. His primary vision for Venezuela at the moment was, we are going to expand participatory democracy. So we're going to try to create mechanisms for people who have felt left out of the political system to have more direct engagement with the political system. And we're going to rebuild state capacity by rebuilding our oil industry, which in the 1990s had undergone a process of reprivatization, even though it had been nationalized in the 1970s under that period of, you know, oil boom.

52:11And so those were the two primary hallmarks of the early Chavista sort of vision for Venezuela. And so part of the story of Chavez, even in the beginning, is going to be about his relationship to the country's oil reserves and the price of oil when he takes power. Can you tell me about that? The price of oil when Hugo Chavez is inaugurated into office in 1999 is$8. Very low. I mean, I'll give you the contrary example. At the height of peak oil, the price per barrel of oil was around$160. Jesus. So if you think about the difference between$8 and$160, it's a lot. Yes. Right now, for instance, if you look at oil prices, they're around$60.

52:59The historic average has been between$45 and$50. So$8 is not just low, it is risibly low. And so one of the things that Chavez tries to do in terms of building state capacity by revitalizing, not just revitalizing, but capturing more of Venezuela's oil revenues is to bring OPEC, that long, kind of toothless, yet seemingly very powerful, you know, global cartel, together to say to them first, listen, we have to get this house in order. Esto tiene que ver con la cumbre de la OPEC. Ustedes lo saben. El ingreso del país se basa fundamentalmente todavía en el ingreso petrolero. Y el ingreso petrolero del país depende del potencial de producción, de la capacidad de producción del país y del precio del barril de petróleo.

54:01Oil prices do rise somewhat in his first couple of years in office. I think they get up to about$22 per barrel right around 2001. But something dramatic changes in the relationship between the United States and Venezuela at that time, and in particular, in the relationship between the United States and Hugo Chavez. Obviously, the attacks of September 11th in 2001 are extremely traumatic for the United States and the world. The subsequent bombing campaign of Afghanistan is a moment when, using his communicational skills and access to media, Chavez publicly decries the bombing campaign as a cruel and exaggerated response to a vicious act.

55:05Of course, the incoming Bush administration is in no mood, and neither, I should say, is the U.S. public at the time, broadly speaking, in no mood to be criticized about their sort of response to 9-11.

55:30But what it does is it puts Chavez in the sights of the United States. A few months later, in April of 2002, Hugo Chavez is briefly overthrown after a series of popular protests, all of them having to do with control over the nation's oil company called PDVSA and what it was going to do in this moment. That led to confrontations in the streets, which left several people dead, which then induced a coup that ousted Chavez from power. Then the United States and the Bush administration openly said, this was great. And we absolutely support this coup. And we're ready to work with the new government in Venezuela.

56:20And it's fantastic that Hugo Chavez is no longer in power. But isn't the new government in power for like three days or something? Yes.

56:34In the most improbable and truly unprecedented turn of events, Hugo Chavez returns to office within 72 hours. Oops. Oops is right. And so when he returns, you see all sort of pack peddling on the part of the White House. But really, by that point, I think the damage is not only done, but irreparable. Ayer, señoras, señores, desde esta misma tribuna, el señor presidente de los Estados Unidos, a quien yo llamo el diablo, vino aquí hablando como dueño del mundo. I think by that point it really convinces Chavez that there's no possibility to think about the United States government as anything other than this kind of, that if anyone steps outside of what the U.S.

57:28government, especially as a, at the time, a unipolar power in the world, that there's nothing that they won't do to try to countermand that.

57:58And then the other big thing that changes is just the price of oil, which, as you said, at the beginning of his presidency was at$8 a barrel. It just shoots up. At one point, it's at$100 a barrel. I mean, it rises as high as around$160. How fast does that happen? So it takes a little bit of time. It really begins to surge after 2003 and the U.S. invasion of Iraq. That takes a significant player out of the picture, at least for some time. It also, of course, creates instability in neighboring oil-producing nations. But that couples with the rise of China, an industrialization that at the time is going to require massive amounts of natural resources to underpin.

58:45So you have this like huge, huge, huge, you both, the supply gets constricted a little bit by the U.S. entering Iraq, but what you really have is like a huge demand surge because of China. Massive. And so both of these things kind of coincide right around 2003 to induce this massive boom in oil prices.

59:06Chapter seven, total power. Alejandro says that Hugo Chavez did not immediately use the immense gusher of money pouring out of Venezuela's oil business. There were other matters to attend to. One, the military. While the coup against Chavez had been unsuccessful, it had revealed the members of the military who were disloyal. So he purged them, which meant he now controlled the military. Chavez also set about bringing Venezuela's national oil company, Pedevesa, completely under his thumb. Something no president before him had really done. The entire premise of the national oil company, PDVSA, after it was founded in the wake of the nationalization in 1976, was that it was going to run as an oil company, not anything else.

59:56right it was going to be free of politics it was going to provide a subsidy to the state but its primary mission is only and exclusively to pump oil from the ground and to export it abroad and to hopefully generate market share especially in the united states chavez was trying to change that chavez was trying to exert actual direct control over the oil industry because the oil executives in Pedevesa were resisting the idea of like, you know, let's cut back on production. Let's not flood the market with oil. And so what he wanted to do was change the governing board of Pedevesa and appoint loyalists to his vision of the oil company and therefore of the country.

1:00:40They resisted that and then the coup happened. But then he tried again in late in 2002. and then the oil industry, most of the engineers and all of the executives conducted a lockout. They went on strike. But what it did for Chavez, he had already again purged the military after the coup. What it did is identify very clearly for Chavez who in the oil industry was not supportive. So he fired them. Just to pause on this for a moment, Chavez conducted these firings live on TV. This was during an episode of Algo Presidente, with Chavez calling out the employees by name and blowing a soccer whistle to celebrate each termination.

1:01:41He fired 18 ,000 oil industry workers.

1:02:00These were executives, engineers, the people with the most technical know-how, lots of history with the company, which then meant that to jumpstart the company again, you had to find people from other parts of the world and then also train a new cadre of engineers, etc. But, of course, now he was doing so in a way that he could refashion the oil industry to serve the vision that he had laid out, which is there's no longer going to be this firewall between the national oil industry and the state. The national oil industry will serve the interests of the people represented by the state, which is represented by me.

1:02:41And so now the direct flow of petrodollars to the executive is complete. There is one final part of Hugo Chavez's consolidation of power here. It comes out of a real miscalculation by the opposition parties. The opposition decides in 2005 to fully sit out the parliamentary elections as a protest against fraud they believe took place in an earlier election. So they boycott the parliamentary elections in 2005, and Chavez says, thank you. Great. If you're giving me the legislature on a silver platter, I will take it. And so, unsurprisingly, the legislature elections in 2005 happened, and now Chavez has control over the military, control over the national oil industry, international credibility, democratic credibility, and control over the Congress just at the time when oil prices are hitting their peak.

1:03:43Just an immense amount of power. It's complete power is what it is. It is total power, which eventually will be the Achilles heel and the reason why chavismo fails.

1:04:08So how does Venezuela go really in just a decade? From an oil-rich democracy with a popular democratically elected president to just abject disaster? That story continues in our next episode, which will be out after the weekend. In the meantime, you can read a great article that Alejandro wrote, which is about Chavez and his political movement, which outlived him, Chavismo. We'll have a link in the show notes. We'll see you next week.

1:05:05Search Engine is a presentation of Odyssey. It's created by me, PJ Vogt, and Truthy Pimentini. Garrett Graham is our senior producer. Emily Maltero is our associate producer. Special thanks this week to Miguel Santiago Colon. Theme, original composition, and mixing by Armin Bazarian. This episode was fact-checked by Piper Dumont. Our executive producer is Leah Reese Dennis. Thanks to the rest of the team at Odyssey. Rob Mirandy, Craig Cox, Eric Donnelly, Colin Gaynor, Maura Curran, Josephina Francis, Kirk Courtney, and Hilary Schaaf. If you'd like to support our show, get ad-free episodes, zero reruns, and bonus episodes.

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